Rupee recovers 1.75 as political noise eases

The rupee staged a sharp recovery on Monday as it appreciated Rs1.75 in the inter-bank market to close at Rs182.93 against the US dollar aided primarily by the easing political noise and the emergence of clarity.

Investor speculation ended in the foreign exchange market as the political scene turned stable ahead of the formation of a new government.

According to the State Bank of Pakistan (SBP), the rupee had closed at Rs184.68 against the greenback on Friday.

A report of Arif Habib Limited stated that the rupee appreciated 0.96% day-on-day, but it was still down 13.88% since the beginning of current fiscal year on July 1, 2021.

“In the last two trading sessions, the rupee recovered 2.85%,” it said.

Speaking to The Express Tribune, Arif Habib Commodities CEO Ahsan Mehanti said that political turbulence had largely eased, which helped the rupee to make a sharp recovery against the US dollar.

“The market had turned speculative over the past few days, which was driving the rupee’s decline,” he said. “Secondly, the measures taken by the State Bank of Pakistan are proving to be supportive for the economy, particularly the rupee.”

He pointed out that last week the central bank imposed 100% cash margin on 177 imported products and that measure provided massive support for the rupee.

Moreover, the State Bank also raised the benchmark interest rate by 2.5 percentage points to 12.25%, propping up the rupee against the US dollar.

“However, the main reason is the falling political noise in the country,” he said.

Echoing similar views, Pak-Kuwait Investment Company Head of Research Samiullah Tariq agreed that political clarity was steering the appreciation of the rupee.

According to him, people were of the view that weakening economic cues could now come under control, hence, the rupee was appreciating.

“Moreover, commodity prices are expected to recede as well, therefore, there is optimism in the foreign exchange market,” he said.